Any monies or things of value received by or to be received by a recipient or any member of their benefit unit should be considered from several perspectives. These include: 1. reporting duties (see Ch.6: "Information Eligibility"), income treatment (in the month in which they are received or allocated: see Ch.7: "Income Rules") and asset treatment (in subsequent months: see Ch.8: "Asset Rules"). It is an extremely common mistake to ignore any or all of these considerations, often resulting in disentitlement and/or overpayment assessments (see Ch.11: "Director Decisions") and in some cases fraud prosecution (see Ch.14: "Fraud and Prosecutions").

A "benefit unit" (the applicant/recipient, spouse and any other dependents) is not eligible for income support if the total assets of the benefit unit members exceed the applicable asset limit, or "cap". However, many assets are exempt from counting towards the asset limit. In this Chapter the term 'chargeable' assets means those that count towards the asset limit, and 'exempt' assets means those that do not.

All members of benefit unit have a duty to fully disclose assets held at the time of application - and anytime they are received thereafter. As a practical matter it is safest to report the assets and let the Director make its determination as to whether they are chargeable or not - it's better to fight an issue like that on appeal to the Social Benefits Tribunal than in criminal court on a fraud charge.

No definition of 'assets' is found in the ODSP Act or Regulations, so ODSP law looks to common law definitions. Roughly, it is any property of value that is available for support. Assets can include cash money, money in bank accounts, investments, real estate, cars, debts due for repayment to the benefit unit, and other forms of property. It could conceivably cover intangibles such as intellectual property rights (eg. copyright), etc - but such situations would be uncommon.

A key concept is that an asset must be 'available' for use to support the recipient (typically available for easy conversion to cash - ie. "liquid"). For example, a gift under a will that is still tied up in estate settlement is not an 'asset' until it is available to be received or paid out. This general principle of "availability" was reaffirmed in a 1987 Ontario Divisional Court case, Ontario (COMSOC) v Henson (discussed below in s.5: "Trust Funds") under former legislation dealing with the term "liquid assets". While the present law only uses the term "assets" now, the Henson principle is still good law if only for the practical reason that counting assets not "available" for support would be irrational for the purposes for which ODSP was intended.

(b) Other Asset Issues

Like welfare (Ontario Works), ODSP is a program of 'last resort'. This means that - generally - any other financial resources must be applied to the support of the benefit unit before ODSP funds are. Another way of putting this is that most other available financial resources are meant to be consumed before ODSP will be paid (here I call these "chargeable"). The same principle applies to income (Ch.7: "Income Rules") where many other source of income are "chargeable" - or deducted from any ODSP otherwise payable.

One way ODSP tries to ensure that "chargeable" assets are captured for this purpose are through a variety of security interests, similar to those used by private lenders. These are discussed in s.4 below.

As well, ODSP establishes two principles of law which support this goal of minimizing ODSP pay-outs. These are the "duty to realize available financial resources" (s.6 below) and the duty to avoid "improvident disposition of assets" (s.7 below).

The asset limits for an ODSP benefit unit are the total of [Reg s.27(1)]:

$5,000 for the recipient;

$2,500 for any spouse; and

$500 for each other dependent.

(b) Discretionary Increases in Asset Cap

The Director of ODSP can increase these basic asset limits to the extent required for accumulation "in order to purchase an item or service the Director considers necessary for the health of a member of the benefit unit or for disability related items or services" [Reg s.27(2)].

(c) Exceeding Assets Limits

While full ineligibility results for each month that assets are held in amounts exceeding the maximums, special rules apply when asset are 'retroactively' increased, as in the case of an asset re-assessment by the Director or the receipt of most types of back-pay or compensation (eg. EI, CPP, legal settlements).

Under conventional social assistance treatment, any income support paid during a period of ineligibility would simply be totalled up and assessed as an "overpayment" (ie. debt owing: see Ch.11, s.3: "Director Decisions: Overpayments). However where the disentitlement is due to the retroactive increase in assets (for whatever reason), then the amount of the overpayment assessment shall not exceed the difference between the asset maximum applicable to the benefit unit AND the actual amount of assets held during the period in question. This calculation is explained in more detail in Ch.11, s.3(d): Director Decisions: Over-payments: Amount of Overpayment for Excess Assets".

For example, if a single person recipient retroactively received (or for that matter was 're-assessed' as having held) $7,500 in assets over six months, the overpayment assessment would NOT be $5,874 (6 x $979) (the base income support for such a recipient). It would instead be $2,500 ($7,500 minus the basic asset exemption of $5,000).

IMPORTANT NOTE:

A significant problem with this otherwise generous policy is that creates an incentive for the recipient to "hide" excess assets to avoid present ineligibility (which can be quite significant over a number of months, even if the assets excess is small), on the reasoning that 'even if they are caught' the loss of income support will be much less under this special rule.

The problem of course is that such a scheme constitutes fraud and is prosecutable under the Criminal Code as such (see Ch.14: Fraud and Prosecutions").

This section lists and explains assets that are "exempt" from chargeability (ie. do NOT count towards the asset caps) [Reg s.28].

The case of Ontario Disability Support Program v. Passaro (Div Ct, 2010) is authority for the proposition that the below-listed asset exemptions should be read narrowly, and not expanded outside of their specific terms - that is, for an exemption to apply it must fall squarely within these listed exemptions. The Passaro case is at odds with long-standing statutory interpretation law from the Supreme Court of Canada that any ambiguity in the interpretation of benefits-conferring law should be read in favour of the benefits-claimant: Rizzo v Rizzo Shoes (SCC, 1998).

In some cases this can lead to some tricky practical issues, as the exemptions are often determined by the source of the money when it is received and/or the intended use of the money. To apply these exemptions properly one must 'keep track' of such money when it is normally intermingled with other monies. This problem is called "tracing".

For instance, some monies are exempt if - and as long - as they are held for the educational purposes of dependents. This money must be kept track of, and if possible separated from other asset monies, until it is used for that purpose.

The best way to handle this is to think of the exempt monies as in a separate 'account', to be added to and subtracted from, in accordance with the special condition by which it is exempt. A clean way to do this, if possible, is to open a separate account (in the example, an "education account") for this money -though that is not always practical given small amounts. In any event, good records and receipts will help you best prove and utilize the asset exemption.

(b) Principal Residence and Other Real Estate

. Principal Residence

The ownership interest of members of the benefit unit in property which is the principal residence of the benefit unit is an exempt asset.

In the case of a house owned jointly and equally this would be the equity value(sales value minus mortgage and other encumbrances) divided by the number of owners (usually only the other spouse), times the number of such owners who are in the benefit unit (typically the recipient and spouse).

In the case of an owned apartment or commercial building where the benefit unit resides in one apartment, this would be the proportionate equity value of the one apartment in which they reside.

. Other Real Estate

Normally, only real estate (or a portion thereof) that is used by the benefit unit as their principal residence is exempt [Reg s.28(1)1,2] - however any interest in property (but no more than one separate piece real estate) that is not a principal residence is also exempt if "the Director is satisfied that the property is necessary for the health of well-being of one or more members of the benefit unit" [Reg s.28(1)3].

. Real Estate Pending Sale

As well - where an asset (any asset) is being sold, and where the administrator approves of the arrangement, the sales proceeds which will be used in the purchase of a principal residence are exempt. Thus for example if a recipient is buying a new house and selling the old (or selling any asset for that matter), this provision could apply, with administrator approval (which should be sought well BEFORE the transactions are executed) [Reg s.28(1)4].

Further, any real estate interests of a member of the benefit unit is exempt as long as "reasonable efforts are being made to sell the property" [Reg s.28(1)17,18].

. Non-Ownership Interests in Real Estate

Where any member of the benefit unit has an interest in property by a mortgage or an agreement for sale, that interest is an exempt asset [Reg s.28(1)5]. Thus where a member of the benefit unit holds a mortgage as lender, or has money pending payment under an agreement to sell real estate - these are exempt assets as long as they remain unliquidated or unrealized interests. If and when they become liquidated (eg. turned into cash or other items of value), then they fall treatment under the normal income and asset rules.

Each member of the benefit unit may own one car which shall be an exempt asset [Reg s.28(1)6].

The value of any second cars owned by dependents within the benefit unit (spouse, dependent adult or dependent child), if required to maintain employment outside the home, are exempt only to the LESSER of [Reg s.28(1)7]:

the value of the recipient's net interest (ie. equity interest) in it, or

$15,000.

Basically, where any member of the benefit unit owns a second car with net value to them (ie. their equity interest in it) of over $15,000, that net value over $15,000 is chargeable.

(d) Tools of the Trade

Tools of the trade essential to the employment of a member of the benefit unit are exempt assets.

This rule applies where the benefit unit member is a waged employee (ie. under an employer) - NOT when they are engaged in self-employment (ie. as an independent contractor). The next section deals with self-employment, or business, situations [Reg s.28(1)8].

(e) Business Assets (Self-Employment)

The rules governing exempt business-related assets are a bit confusing.

The law states that assets necessary for the operation of businesses are exempt to a maximum of $20,000 for EACH business in the benefit unit, and $20,000 for EACH self-employed person in the benefit unit. It also states that the exemption is no more than $20,000 per business regardless of the number of members in it, and no more than $20,000 per member regardless of the number of businesses they are involved with. The administrator can approve higher exemption limits [Reg s.28(1)9,10,11].

These rules are easy to apply where only one business exists or where only one member of the benefit unit is involved in business/es. However situations of multiple businesses involving multiple members of the benefit unit (while rarer) are not clear. In such a case recall that any ambiguity in the statutory interpretation of benefits-conferring legislation goes in favour of the benefits-claimant: Rizzo v Rizzo Shoes [1998] 1 SCR 27 - and try to muddle through (the welfare worker will likely be just as confused).

(f) Student Funding

Portions of student or trainee loans, grants or awards as approved by the administrator are exempt assets, as long as the recipient stays in the program of studies to which the monies relate [Reg s.28(1)12].

See Ch.7, s.10: "Income Rules: Student and Education-Related Income" for a detailed discussion of the treatment of student and education-related income.

Monies received as compensation for personal injury or death to a member of the benefit unit, as set out below, are exempt to an aggregate maximum of $100,000 [Reg s.28(1)14,14.1,14.2, (2.2)]. These amounts are:

compensation for pain and suffering or expenses incurred or to be incurred as a result of an injury to or the death of a member of the benefit unit from tort personal injury claims;

However, amounts paid under the Statutory Accident Benefit Schedules (SABS) for the following benefits may not be counted within this exemption:

Subsections 13 (1), (2), (3), (7) and (8) of Regulation 672 of the Revised Regulations of Ontario 1990 (Statutory Accident Benefits Schedule — Accidents before January 1, 1994) made under the Insurance Act ["Benefits if No Income"].

Section 19 of Ontario Regulation 776/93 (Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996) made under the Insurance Act ["Other Disability Benefits"].

Section 12 of Ontario Regulation 403/96 (Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996) made under the Insurance Act ["Non-Earner Benefits"].

compensation "for loss of guidance, care and companionship as a result of death or injury" from 'dependent tort claims' under the Family Law Act (where family members claim compensation for another family member's injury or death); and

non-economic loss (NEL) awards under the (former) Worker's Compensation Act and the Workplace Safety and Insurance Act, 1997 (these are lump sum awards which are similar in nature to pain and suffering awards) for workplace accidents.

The Director may increase this limit if "appropriate arrangement for the administration of the amount exceeding $100,000" is made and that excess amount:

is paid for expenses incurred or to be incurred as a result of an injury to or the death of a member of the benefit unit from "tort" personal injury claims such as auto accidents, slips and falls, assaults, etc;

will be used for Director-approved disability-related items or services, including education or training expenses, within in a reasonable time [Reg s.28(2)(2.1).

A corresponding income exemption for such awards is discussed at Ch.7, s.8(c) "Income Rules: Other Exemptions from Income: Personal Injury-Type Awards".

The issue of interest chargeability on such awards is discussed below in s.3(r)["Interest on Retroactive Lump Sum Payments"].

(i) Exempt Government Payments

Payments from the following Ontario and federal government agreements and programs are exempt assets [Reg s.28(1) paras 13,16,19,23,24,25,27,40].:

The Helpline Reconciliation Model Agreement;

The Multi-Provincial/Territorial Assistance Program Agreement;

The Grandview Agreement.

Extraordinary Assistance Plan (Canada)

Ontario Hepatitis C Assistance Plan (applies where recipient contracted the disease before 01 January 1996 and after 30 June 1990)

Pre-1986/Post-1990 Hepatitis C Settlement Agreement (December 14, 2006) (applies to any payments under this agreement except those for: loss of income under section 2.05 of the Agreement, loss of services under section 2.06 of the Agreement and compensation to dependants under section 4.04 of the Agreement)

1986-1990 Hepatitis C Settlement Agreement (15 June 1999) (applies to lump sums paid other than a loss of income payment or a loss of support payment)(applies where recipient contracted the disease between 1986 and 1990)

Opportunities Fund for Persons with Disabilities" (Employment and Social Development Canada), if the payment has been or will be applied to expenses incurred for participation in a welfare-approved employment-related activities.

Walkerton Compensation Plan, except payments for future lost income.

local Disaster Relief Committee (established under the Ontario Disaster Relief Assistance Program) if the payment will be used within a reasonable period for the purpose for which it was made. Payments under this program for loss of income are not exempt.

Payments from the Government of Alberta as compensation for sterilization.

compensation, other than compensation for loss of income, related to a claim of abuse sustained at an Indian residential school, including compensation received under the Indian Residential Schools Settlement Agreement.

a "personal credit" within the meaning of section 5.07 of the Indian Residential Schools Settlement Agreement.

grants, items or services (ie. their value) provided for energy efficiency and conservation by gas distribution utilities, local distribution companies, municipalities, the Independent Electricity System Operator, Ontario or Canada.

a payment made in accordance with the Ontario Child Benefit Equivalent Act, 2009.

Youth Jobs Strategy payments made by either or both of the Ministry of Economic Development, Trade and Employment and the Ministry of Training, Colleges and Universities, if, in the opinion of the Director, the payment will be used within a reasonable period and for the purpose for which it was paid;

grants under the Northern Health Travel Grant Program, as administered by the Ministry of Health and Long-Term Care, that exceeds the amount paid as a benefit for medical transportation [see Ch.4, s.2(b)] for the same trip;

payments from the Settlement Fund in the Rideau Regional Centre class action;

payments from the Settlement Fund in the Southwestern Regional Centre class action.

payments from the Nova Scotia Home for Colored Children Settlement Agreement;

payments from the Athlete Assistance Program, administered by the Department of Canadian Heritage;

payments made by Ontario or Canada pursuant to an aboriginal land claim settlement agreement.

These are specialized agreements and programs. The recipient and benefit unit members will typically be aware if they have received any monies under them.

(j) Dependent Child Earnings Asset Exemption

The earnings and amounts paid under a training program to a member who is under 18 years or age [Reg s.28(1)32] are exempt assets. Use of this exemption may require "tracing" as explained above.

The legal status of loans as chargeable "income" is discussed extensively in Ch.7, s.9: "Income Rules: Loans as Income.

. For First and Last Month's Rent

Loans received for the purpose of paying first and last month's rent for necessary rental accomodation for the benefit unit is an exempt asset - as as long as welfare is satisfied that it will be so used in a reasonable period. This exemption may require "tracing", as explained above [Reg s.28(1)22].

. To Purchase Exempt Assets

Loans approved by the Director for the purchase of an exempt asset are themselves exempt assets [Reg s.28(1)23].

. Certain Loans for Disability Purchases

Loans taken against a life insurance policy to purchase disability-related items or services as approved by the Director are themselves an exempt asset [Reg s.28(1)21].

(l) Monies from MCSS Program Participation to be Used for Post-Secondary Education

Monies paid by the Ministry of Community and Social Services to a member of the benefit unit who is a workfare participant for successful participation in certain welfare-approved programs are exempt assets - IF such monies used for the person's post-secondary education within a reasonable period as determined by the administrator [Reg s.28(1)25]. These include programs directed at:

successfully completion of a high school diploma,

developing employment-related skills, or

further developing of their parenting skills.

Recipients should inquire of ODSP whether the specific program they are considering is included within this exemption.

(m) Adult Member Income During High School or Training

The following employment and training program income of an adult member of the benefit unit are exempt assets:

earnings while the member is attending secondary school full-time;

training program income while attending school or the training program;

the above earnings or training program income are still exempt assets after the work or training ends, as long as they are being used, or are being saved for use within a reasonable time, for training or post-secondary training purposes [Reg s.28(1)32.1,32.2].

(n) Registered Education Savings Plan (RESP)

An RESP is an exempt asset where held by a relative (by blood, marriage or adoption) of a member of the benefit unit, for the benefit of the member of the benefit unit [Reg s.28(1)26].

(n.1) Registered Disability Savings Plan (RDSP)

Starting in 2008, the federal Income Tax Act created a new form of tax-deferring registered savings plan, called the 'Registered Disability Savings Plan' ("RDSP").

Funds held in an RDSP for a recipient are exempt assets [Reg s.28(1)26.1].

Insurance monies received for loss of real or personal property are exempt if the money will be applied in a reasonable time to [Reg s.28(1)33]:

purchase or repair of exempt assets;

purchase or repair of any asset necessary for the health or welfare of a member of the benefit unit, as approved by the administrator;

purchase of repair of an asset whose ownership by members of the benefit unit does not put the benefit unit over the asset cap;

additional living expenses, including temporary shelter costs, if insurance-covered damage renders the recipient's primary residence unfit for habitation; or

debt obligations of a member of the benefit unit.

(p) Hardship Payouts under Pension Benefits Act

Under some circumstances (financial hardship) persons may access pension funds otherwise "locked-in" under the Pension Benefits Act. While there is no legal duty to access these funds under the general social assistance "duty to realize available assets", their income and asset chargeability treatment WHEN the funds are in fact accessed is less clear.

See s.6: "Duty to Realize Available Financial Resources" for a fuller discussion of these issues, and the income and asset treatment of such monies.

(q) Life Insurance Policies

The cash surrender VALUE (not the actual funds when redeemed) of a life insurance policy is an exempt asset, subject to a combined $100,000 maximum with testamentary and life insurance based trusts [Reg s.28(1)20,(3)] (see s.5: "Trust Funds", below).

When however a full or partial redemption of the cash surrender value is actually made, then the funds are subject to normal income and asset rules. Note in particular that conversion into a trust - or expenditures for approved disability-related items - may continue to protect the redeemed monies. Review all the other exemptions carefully to see if they could apply. As in all such situations, consultation with ODSP before taking any steps is a wise move.

(r) Interest on Retroactive Lump Sum Payments

. Overview

Situations where a recipient receives a retroactive lump sum payment - such as an MVA settlement or STD/LTD back-payments - often involve the payment of accrued interest on the delated payment (retroactive government entitlements usually do NOT include interest).

The issue can arise in such situations as to whether the interest should be treated in the same way as the principal amount for income and asset purposes (as different types of monies are treated quite differently), or whether it is 'general' - and chargeable - income or assets. While in my experience it is usual for any interest amounts to be allocated proportionally with the elements of the principal payment, and thus subject to the same income and asset treatment, the issue did arise directly in the case of Mule v Director, ODSP - considered below. The case is essential reading for anyone involved in such a conflict.

. Case Note: Mule and Director, ODSP (Div Ct, 2007)

In Mule v Director, ODSP (Div Ct, 2007) the court was faced with the (relatively) straightforward issue of whether:

... prejudgment interest on damages for pain and suffering form(s) part of the "damages or compensation for pain and suffering" received by an injured person?

Note:
"Prejudgment interest" (as distinct from "post-judgment interest", which is self-explanatory) is a concept used in civil litigation (lawsuits). It operates to give a successful plaintiff interest on damage awards (which are always made later) for the period between the filing of the lawsuit and the issuance of judgment. Under the Courts of Justice Act, s.128, [and Rules of Civil Procedure R53.10], the rate for pain and suffering (called "non-precuniary loss") is five percent. This point is relevant to the case.

The significance of whether prejudgment interest formed part of the pain and suffering award is that an amount [$100,000 at April 2008] of such damages (when assessed collectively with some other income types) may be exempt from both income and asset chargeability. However, IF interest accruing on such amounts - necessarily paid in a lump sum (usually) years later was NOT included within the exemption - overpayments and even retroactive ineligibility would result.

Despite resourceful reasoning by the SBT member below, the court ultimately held - at least in the case of pain and suffering awards - that prejudgment interest was to be grouped with the main lump sum and thus within the exemption. While generally sympathetic in its reasoning to the conclusion that interest was an 'indivisible part' of ANY retroactive lump sum award, the court located its decision on the safer grounds that the special interest rate treatment (see the Note above) accorded pain and suffering damages especially justified such treatment:

Since the victim must, of necessity, suffer without compensation for a period of time until his or her damages are capable of assessment, the legislature has determined that the victim will be entitled to additional compensation at the rate of 5 per cent of the non-pecuniary damages award per annum. This award is not tied to the amount of interest that the award could have earned had it been paid on the day that the cause of action arose, but is instead a fixed percentage. Seen in this way, the award of prejudgment interest can be said to form part of the overall compensation package to which the victim is entitled.

As noted above, the case is essential reading for anyone facing an argument from the Director that interest on a lump sum retroactive payment is chargeable, with respect to either income or assets.

(s) Earnings and Training Income Used for Post-Secondary Education

Commencing 01 April 2009, earnings of a post-secondary education student, or amounts paid to such a student under a training program, are exempt assets if ALL of the following conditions are met [Reg 28(1)32.3]:

the income is earned or paid while the student is a member of either an OW or an ODSP benefit unit;

the income is paid during school attendence or earned or paid within 16 weeks preceding attendence (commonly, summer earnings);

the program of study is either:

- approved for student loans eligibility under s.7 of Reg 268/01 under the Ministry of Training, Colleges and Universities Act [Note: this does not mean that a student loan has been received by the student for the program, just that the program is one approved by the Ministry generally for student loan eligibility];

- where the student is a non-disabled dependent spouse, dependent child or dependent adult in the benefit unit, 60% of a full course load,

OR,

- where the student is disabled (ie. a "person with a disability" under s.4 of the ODSP Act, or of equivalent status: See Ch.9: "Person With a Disability"), 40% of a full course load.

and

the income is used for the approved program of study (above).

(t) Transplant Patient Expense Reimbursement Program

Payments made under the Transplant Patient Expense Reimbursement Program funded by the Ministry of Health and Long-Term Care, if the payments are used or will be used, within a reasonable period as determined by the Director, for the purpose for which they were intended, are asset-exempt.

(u) MMAH Ontario Renovates Program

Payments made under the Ministry of Municipal Affairs and Housing’s Ontario Renovates program, if, in the opinion of the Director, the payment will be used within a reasonable time and for the purpose for which it was paid [Reg 28(1)41].

(v) RRAP Loans

Loans, including forgiven loans, or contribution received from the Residential Rehabilitation Assistance Program authorized by section 51 of the National Housing Act (Canada), if, in the opinion of the Director, the loan or contribution will be used within a reasonable time and for the purpose for which it was given [Reg 28(1)42].

ODSP may insist on any of a variety of legal commitments by the recipients as 'security' for the re-payment of income support in the event that such assets or income ultimately become available. The term 'security' is used here in the same manner in which a bank might use it when referring to security for a loan.

Lien requirements against real estate owned by members of the benefit unit were abolished in December 2004. Procedures for discharging existing liens are covered immediately below.

(b) Discharging Liens

. History

Prior to an amending regulation in force on 15 December 2004, ODSP could - in some circumstances - require that the claimant or a member of the benefit unit "consent" to the placement of a lien against their real estate (land or buildings) as a condition of eligibility. This could have been required even if the property was an exempt asset, although not to the principal residence of the benefit unit [Act s.7(3)]. Residual, though ineffectual, lien provisions within the Act were finally repealed on 15 Dec 2009.

The effect of the lien was to bar the sale of the real estate until any ODSP overpayments had been paid off.

. Discharging Liens

If the ODSP Director obtained the lien, and if they further registered it 'on title' (ie. in the land titles or land registry office against the property) then recipients are now entitled to receive a lien "discharge" document on request [Reg s.55].

The lien removal is achieved by registering a further document entitled a "discharge" on title. ODSP may register the discharge themselves on title, although legally they can leave it to the claimant to do the registration - discuss this issue with ODSP to be clear on who is going to do it.

The effect of registering the discharge on title is to cancel the lien. However, any monies paid to prior to 15 December 2004 under the lien are NOT refundable.

(c) "Agreements to Reimburse" and "Assignments and Directions"

. Overview

These are two separate legal instruments, but are usually combined by ODSP in a single document, called the "Agreement to Reimburse and Assignment".

They are usually required by ODSP when a benefit unit has potential retroactive income (eg. any form of back-pay, motor vehicle accident claims) which could apply retroactively to it as income, and thus retroactively eliminate or reduce all or some of income support it has already been paid [Act s.8(1)(2); Reg s.13(1)(2)]. However they can have broader coverage, encompassing future income as well [Reg s.13(6)]. For purposes of calculating any reductions in income support such retroactive income will be "spread" over the months to which it is attributable, and (of course) cannot exceed the amount of income support pay in the months under consideration [Reg s.13(5)].

Further, the Act specifies that the Director's legal authority to seek an "Agreement to Reimburse" or "Assignment" does not apply with respect to [Act s.8(3)]:

payments that would be exempt income [see Ch.7] or assets [see Ch.8]; or

"employment earnings, pension income or other prescribed income that is paid with respect to a period after the period during which the person receives income support".

The first exception here is quite logical, and the second exception appears to simply bar the Director from capturing any monies payable to a recipient for periods AFTER they cease to be in receipt of income support.

. "Agreement to Reimburse"

The first document under consideration here, the "Agreement to Reimburse", is really just a contract between ODSP and the recipient/s to re-pay income support. It has the legal force of a contract - that is, an entitlement to sue in the courts, and also the right to impose an overpayment [Act s.14(2)] - but not the strength of a true security such as a lien (discussed above) or mortgage, which is secured as a legal interest against real estate and has greater coercive force.

As a recipient (and their spouse) is under a legal duty to re-pay any legitimate overpayments assessments in any event, an "Agreement to Reimburse" (by itself)provides little additional security except where the Director runs into some technical flaw in enforcing their usual "overpayment" procedures. It's value to the Director is more the psychological "duty" that it creates in the mind of the recipient.

. "Assignment and Direction"

An "Assignment and Direction" is a stronger form of security than an "Agreement to Reimburse". It is essentially a legal instruction (and permission by the recipient/debtor) for a third party - who owes or may owe money to the recipient/debtor - to pay that money DIRECTLY to the ODSP Director.

The practical advantage of such a device to the Director are plain. It avoids the need to assess an overpayment, which is subject to the low monthly deduction rates[see Ch.11, s.3: Director Decisions: Overpayment"], effectively achieving a 100%deduction rate off the payments received.

The typical situation in which an "Assignment and Direction" is used is where the recipient has a legal claim such as a motor vehicle accident (MVA) lawsuit against someone. Here ODSP would require an 'assignment' of future proceeds from any judgment or settlement and typically send the document to both the recipient's litigation lawyer and maybe also the defendant's lawyer. The lawyers would then be obliged to forward monies in accordance with the Assignment and Direction.

. Failure to Honour Agreements to Reimburse and Assignment

Any disagreements with the Director over the legitimacy of a demand for an Agreement to Reimburse and Assignment should be settled before the documents are signed. Of course, recipients should recognize that successfully persuading the Director out of their request will almost certainly result in overpayment assessments [see Ch.11, s.3: Director Decisions: Overpayments], income impact [see Ch.7] and asset impact [see Ch.8] - all of which must be assessed in light of the recipient's other financial circumstances, and the amount and allocation of the monies received.

'Fighting' the operation of an already-executed "Agreement to Reimburse and Assignment" once it has been executed (signed) can be risky.

Firstly, they are "irrevocable" and the Director is likely to refuse to recognize any revocation [Reg s.13(3)] (whether the third party payor will recognize and respect such a revocation is up to their analysis and is thus uncertain). Further, there is a requirement that any recipient who actually receives the subject money must pay it over to the Director [Reg s.13(4)] (though that can hardly be argued to apply to monies which could not be subject to such demands in the first place).

The main problem with 'fighting' arises when the failure to honour an executed assignment by the third party payor is "caused by a member of the benefit unit", or when the recipient receives the subject money directly and money refuses to pay it over to the Director. In both such cases the Director may disentitle [Reg s.13(8)], though such disentitlement would probably be lifted by pay-over of the funds in dispute - which would be assessed as an overpayment [Reg s.13(9)][see Ch.11, s.3: "Director Decisions: Overpayments"].

(d) Subrogation

. Overview

In it's usual NON-social assistance form, "subrogation" is the legal right of an insurance company to enforce the legal rights of the "insured" (ie. the policy-holder) to pursue their claim against someone who caused them harm - which harm the insurer has already or will compensate the "insured" for.

ODSP law adopts the same principle, giving the Director a "subrogated" right - when a benefit unit member suffers a loss as a result of someone's act or omission (legally, a tort) - to pursue a claim against the wrongdoer. This right includes a right to sue [Act s.52].

. Amount of Subrogation

The amount of the subrogated claim by the adminstrator is limited to the amount of monies spent in past (and anticipated to be spent in the future) under any Ontario social assistance program (eg. Ontario Works and ODSP and their
predecessors).

. Where Recipient Sues

If such a tort claim is made by the member of the benefit unit, they must notify the Director of this promptly.

In practice, while the Director has the right to commence and conduct such a lawsuit themselves, they typically just insist that the recipient pursue it through a lawyer (usually a personal injury lawyer acting on a contingency fee arrangment) as an aspect of their 'duty to realize all available resources' (see s.6 below). Any lawyer engaged by the recipient will likely be sent an "Assignment" (see above) signed by the recipient at the insistence of the Director, to hold any recovered monies in trust for the purpose of refunding to the Director the applicable ODSP income support paid to the recipient.

. Case Law

In S v K 55 OR (2d) 111 (Ont District Ct, 1986) a court application for domestic support brought by a recipient at the compulsion of the FBA Director was challenged as being "champertous". "Champerty" and "maintenance" are old statutory law principles barring unwarranted or financially-motivated interference in or encouragement of litigation. The court dismissed this argument citing (amongst other things) that as the right of 'subrogation' was also statutorily-based that it trumped the champerty statute, that the champerty statute did not bind the Crown, and that the government had no financial interest in the case as it would have reduced the recipient's allowance anyway if she did not proceed with the application.

(e) Limits to Security Requirements

Of course, any "Agreements to Reimburse", "Assignments and Directions", overpayments and civil claims can only cover what ODSP is entitled to have repaid. Income and assets that would be exempt from assessment as deductible income or exempt assets are still exempt for purposes of determining any retroactive amounts owing under such arrangements.

(f) Family Support Workers

ODSP may employ "family support workers" who have authority to explore, negotiate and enter into support arrangements from those under a court order or agreement duty to support claimants or members of their benefit unit. They may also assist a claimant with such court proceedings and agreements, commence related court proceedings themselves, and investigate into, inquire into and gather, disclose and use personal information as needed to perform their duties [Reg s.54.1].

I am unaware as to whether such powers have been used, and if so, to what extent.

Trust funds can be "testamentary" (ie. created in a will) or "inter vivos" (created while the persons creating the trust still lives). Technically, trust funds are "owned" by their trustees, for the benefit of the "beneficiaries". The interest of the beneficiary is also called a "beneficial interest".

Trust funds are almost always invested, typically conservatively. A common, but not necessary, accompanying provision in any trust fund arrangement is to pay out the interest at regular intervals, but only allow pay-out of portions of the principal in special circumstances determined by the trustee. If any monies are actually paid-out (as opposed to being re-invested) to a claimant from a trust fund they will be assessed at that point as to their income impact (see Ch.7 "Income Rules", especially s.8(f): "Twelve-Month $6,000 Income Exemption" and s.8(k): "Trust Income".)

The Director's main concerns with such trust funds are the extent to which the principal of the trust fund can be counted as a chargeable asset and thus towards disentitlement. Recall that the key issue in defining a chargeable asset is whether it is "available" for the support of the benefit unit.

Under certain conditions [see sub-section (d) below] ODSP law - unlike welfare(Ontario Works) law - exempts trust funds from being counted as chargeable assets (even if "available") to a combined total (with the cash surrender value of life insurance policies) of $100,000.

However, a properly designed Henson trust (see immediately below) is totally exempt from chargeability - regardless of amount, until pay-outs are made.

(b) Henson Trusts

It is the issue of "availability" that was the essence of the leading court case on social assistance and trust funds: Ontario (COMSOC) v Henson (reviewed below). When considering the asset impact of trusts on a benefit unit, the first thing that must be done is to determine the type of trust involved: is it a "Henson trust" or a non-Henson trust?

The distinction between the two is whether the claimant has any ability to influence the timing, amount or manner of the release of the money to themselves or any member of the benefit unit for support purposes. The key concept underlying this is whether the trust monies are "available" or "liquid" to the benefit unit for support.

A "Henson trust" is one that gives 'unfettered' or 'absolute' discretion to the trustee as to how to distribute the monies of the trust to the beneficiary of the trust. As such, monies in a Henson Trust are beyond the control of the beneficiary and are NOT chargeable assets or income for purposes of the asset maximums.

In Ontario (COMSOC) v Henson [1987] OJ #1121 (Div Ct); (appeal to CA dismissed), the court held a testamentary trust to be unavailable to the mentally handicapped FBA recipient (and thus not a 'chargeable' asset) where the will directed the trustees:

To pay so much of the income therefrom, or the whole of the income therefrom, together with so much of the capital thereof to or for the benefit of my daughter AUDREY JOAN HENSON as my Trustees shall in the exercise of their absolute and unfettered discretion consider advisable from time to time.

The will further directed the trustees to maximize the beneficary's entitlement in light of other sources of support (collateral benefits) - effectively inviting them to conspire to continue dependence on social assistance:

Without in any way binding the discretion of my Trustees, it is my wish that in exercising their discretion in accordance with the provisions of this paragraph, my Trustees take account of and in so far as they may consider it advisable take such steps as will maximize the benefits which my said daughter would receive from other sources if payments from the income and capital of the residue of my estate were not paid to her for her own benefit, or if such payments were limited to an amount or time. In order to maximize such benefits, I specifically authorize my Trustees to make payments varying in amounts and at such time, or times, as my Trustees in the exercise of their absolute discretion may consider in the best interests of my said daughter.

In closing, the court held the funds to be unavailable - even by way of compulsion (the normal manner would be a court application against the trustees) - at the hands of the recipient:

In our view, the provision of the will, set out above, gives the trustees absolute and unfettered discretion; the respondent could not compel the trustees to make payments to her if there were not funds available to her under the Family Benefits Act, sufficient to meet her needs. Therefore, in our view, Miss Henson does not have a beneficial interest, as that term is used in the definition of liquid assets.

The Henson case - being endorsed by the Court of Appeal - is strong authority for a 'recipient-generous' interpretation of testamentary trusts. However it demonstrates two further themes that recur in the following cases: the important of the construction of the specific testamentary document being considered, and (frankly) the demeanour of the specific court in which the issue is in front of.

(c) Case Law

These are two sample cases of further court treatment of this issue. There are more, several of which are referred to in Ozad.

. Ozad

In Ozad v Ontario (COMSOC) [1998] OJ #6498 (Div Ct) the court found a testamentary trust to be effectively "available" where the trust deed placed a positive burden on the trustees to support the developmentally-disabled beneficiary/recipient. The court reasoned that this enabled the recipient to take the trustees to court to compel pay-out from the trust. The key phrasing in the will was:

... in my Trustees' absolute discretion, to use such part of the income and/or principal of the fund, during the lifetime of my said son, as my Trustees deem adequate for his support, maintenance and education.

The case places a heavy burden on unsophisticated (and in this case mentally-handicapped) recipients to realize available resources (through court action), and seems to be at odds with the principle established in the Henson case - where "absolute discretion" rendered the funds unavailable. However there were further related - and ambiguous provisions in the will - and the court did engage in an extensive review of related case law, including Henson. I suggest that Ozad is essential reading - along with Henson for anyone drafting a "Henson" trust. Ozad lies at the unsympathetic end of the continuum, opposite from Henson.

. Guy

In Guy v Northumberland County [2001] OJ #2166 (Div Ct) the OW recipient and her brother were joint trustees over two trust funds for the recipient's children. While the recipient never declared the trust funds, the court held that - on examination of the construction of the will - that it was the testator's intention that the funds accumulate until the children were 24, subject only to encroachment for "the benefit" of the beneficairy at the absolute discretion of the trustees. The court considered and distinguished Ozad, reaching the conclusion that the beneficiaries would not be able to force encroachment on the principal by the trustees through the courts.

(d) Trust Funds $100,000 Asset Exemption

ODSP recipients benefit from a $100,000 asset exemption for the combined value of [Reg s.28(1)19,20 and (3)]:

any trusts if the capital is derived from inheritance or life insurance proceeds; and

the cash surrender value of any life insurance policy.

This also applies to welfare claimants temporarily as long as they have a pending, first-time ODSP application that has not yet been finally disposed of (see the welfare program: Ch.7, s.3 "Asset Rules: Asset Limits Where Pending First-time ODSP Application", above).

Note that the amount of the $100,000 Trust Fund exemption still "available" (ie. unused) after trust fund "use" is also used as the maximum INCOME exemption for charitable-type donations [see Ch.7, s.8(g): Income Rules: Charitable-Type Donations"].

(e) Benefit Unit Member AS Trustee

Occasionally a recipient or member of the benefit unit is themselves a "trustee" for someone else's trust. While monies received and held for such a "beneficiary" are held in the name of the trustee, they are not really the trustee's money, as they are held "beneficially" for the beneficiary.

As it is generally illegal for such a trustee to use those monies for their own purposes, the funds are "unavailable" for the support of the trustee personally. ODSP will be particularly suspicious in such cases to ensure that such trust monies are not actually being used by the benefit unit for their own purposes.

(f) CAUTION

Whether a trust is a Henson Trust or otherwise, or the extent to which monies in a trust are "available" to the benefit unit, is always a matter of a careful review of the Trust deed by someone who knows what they are doing, such as a lawyer or experienced trust counsellour.

When considering creating a trust for someone who is or might become a recipient, careful and informed planning is similarly required and the services of such a professional are well-advised.

In such situations special attention should be paid to the extent to which any current or likely-future ODSP recipients are consulted about the form of the trust. Current recipients are under a 'duty to realize all available financial resources' (see s.6, below) and a similar duty to avoid "improvident disposition of assets" (see s.7 below). As such their efforts to "shield" potential trust assets from availability may be viewed as illegal from both eligibility - and (in some cases) prosecution perspectives.

Note as well that the Ontario Disability Support Program Act makes it a prosecutable offence to "knowingly obtain or receive" and to "aid or abet" another to "obtain or receive" income support to which they are not entitled [Act s.59]. Related prosecutions may also be available under Criminal fraud and conspiracy provisions.